In a research paper published on Monday, John Barrdear and Michael Kumhof, economists at the Bank of England, call for central banks to issue their own digital currencies, along the line of Bitcoin.
They based their advocacy on the idea that “reductions in real interest rates, distortionary taxes, and monetary transaction costs” would boost the economy of the US, for example, by, get this, a permanent 3%.
Part of their argument is based on the view that central bankers using digital currency would have a more effective tool to tame financial booms and busts.
This flies in the view of Austrian school business cycle theory, which views the actual creation by a central bank of money (and thereby credit) as the epicenter of the problem.
A digital currency that could be expanded and contracted by a central bank does nothing to eliminate the misallocations and potential threat of raging price inflation that occur from Federal Reserve money supply manipulations.
What a digital currency would do is make it easier for government to track everyone’s transactions. Thus. expanding the surveillance state.